Davie said the price of digital audio broadcasting – DAB – sets had to be slashed if there was to be the step change in listener behaviour that will enable national and regional stations to be removed from the analogue radio signal.

He added that commercial radio would have to play its part in funding the hugely expensive rollout of the DAB transmitter network that is required to match the coverage level currently provided by FM.

But in the first salvos of a debate that is likely to dominate the industry over the next 12 months, Andrew Harrison, chief executive of the commercial radio trade body, the Radio Centre, said there was a limit to the amount his members were prepared to invest in the DAB network.

"It's very ambitious," Davie said of the 2015 switchover date, speaking at the Radio Festival in Nottingham today. "It's very helpful in that it gives suppliers certainty in terms of where we are travelling.

"At the moment you can only buy a DAB set for £50-plus. We are never going to get switchover by 2015 unless we really focus minds. I said on current trends it won't happen in our lifetime, and I meant it.

"2015 helps us make it a reality. Will we make that date? I think that's ambitious. A decent DAB radio has to cost £15, not £50."

Davies added that there was an "enormous amount of work" still to be done. "We have got a lot of work to do even before we get into the zone of credibility. We have got to get digital listening levels dramatically up."

Carter's Digital Britain report said national and local stations broadcasting on DAB could be removed from FM as soon as 2015. But a detailed plan for so-called "digital upgrade" will only kick in when digital accounts for more than 50% of all radio listening. At the moment it is just over 20%.

Harrison said: "Two critical things need to happen between now and 2015 – [digital] coverage has to be built out and we need to ensure that DAB is in cars."

Davie added that the BBC would fund the rollout of its national DAB multiplex. But he said there was still a debate to be had about how much the corporation paid for the expansion of local and regional multiplexes – and how much was funded by the cash-strapped commercial sector.

"We will have a bit of a debate and where commercial stops and where the BBC starts. We are both going to have to play a part," said Davie. "It should be a balance of commercial and public money. That is what is in Digital Britain."

Harrison said the commercial sector would "happily invest [in the DAB transmitter network] to the point where it is commercially viable". But he said beyond that funding had to come from the BBC or the public purse.

Davie said it was crucial the BBC and commercial radio joined forces to secure the medium's digital future.

"Unless we huddle together for scale we are going to be in trouble. Look at Sky, look at Microsoft. There is a huge global battle going on for content. Where is radio going to be in that?" he added.

The BBC was currently drawing up its digital rollout plans to see where, and when, it was possible to extend DAB coverage, and how much it would cost, he said.

"The devil is in the detail. We are looking now and in the next 12 months with commercial radio to get into that local and regional layer and really understand what is commercially viable and what isn't," added Davie.

"It's in our interest to preserve our local services. There is a lot of demand on BBC money at this time, and we want to get through this process quickly. Early next year we will come back with a plan."

Stuart Taylor, chief executive of GMG Radio, part of the group that published MediaGuardian.co.uk, said the industry "had to make a plan and had to make it work".

"You have got to get all your ducks in a row to make DAB work, otherwise we are going to be talking about the same thing every year. I am confident in five years a lot will have changed and a lot of those boxes will have been ticked," Taylor added.

Simon Cole, chief executive of UBC Media, said digital switchover would relieve the commercial sector of a £35m annual burden of broadcasting on both analogue and digital.

"The ability to invest in content has been squeezed out by the £35m dual transmission costs, no business can sustain that. Anyone who works in commercial radio knows how difficult that has been. That money must go back into content," Cole added.

In a debate about the future of radio at the Radio Festival today, there was recognition on all sides that the environmental impact of DAB radios – they require much more energy than analogue sets – had to be addressed.

"The energy consumption issue is a big one, I don't dismiss it as just noise," said Davie. But he added that the 2015 date would help focus manufacturers' minds to tackle the issue. "We must give the manufacturers a really tough brief," he said.

Harrison predicted that by 2015 digital would account for 80% of radio listening. By that time, said Cole, the industry would be dominated by "companies who aren't even here yet".

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